What is the main purpose of Truth in Lending?

The main purpose of Truth in Lending is to disclose the true costs of obtaining credit. This law requires lenders to provide clear and understandable information about the costs associated with borrowing, including interest rates, terms of repayment, and any additional fees. By doing this, borrowers can make informed decisions about taking on credit, allowing them to compare different loan offers effectively.

The requirements are designed to ensure transparency and protect consumers from hidden fees and misleading information that could lead to unfavorable loan terms. This approach empowers consumers by enabling them to evaluate the total cost of a loan rather than just the interest rate, thereby promoting more informed financial decision-making in the marketplace.

While controlling the costs to close a transaction and interest rates might be desirable outcomes, they are not the primary focus of the Truth in Lending Act. Similarly, the regulation does not limit its scope exclusively to FHA loans, as it applies to a wide range of credit-related transactions.